Existence and structure of stochastic equilibria with intertemporal substitution
AbstractWe prove existence of an Arrow-Debreu equilibrium when agents' preferences exhibit local substitution in the sense of Hindy, Huang, and Kreps (1992). Efficient allocations and supporting price functionals are identified and characterized. Under Hindy-Huang-Kreps preferences, equilibrium price processes are semimartingales for arbitrary endowments, but in general, they do not belong to the space suggested originally by Hindy and Huang (1992) due to an additional singular local time component.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 5 (2001)
Issue (Month): 4 ()
Note: received: July 2000; final version received: January 2001
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Web page: http://www.springerlink.com/content/101164/
Other versions of this item:
- Bank, Peter & Riedel, Frank, 2000. "Existence and structure of stochastic equilibria with intertemporal substitution," SFB 373 Discussion Papers 2000,104, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
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